The AP reports today on the latest bump in Obamacare’s rollout:
The Obama administration — in yet another health care overhaul delay — has quietly notified insurers that a computer system glitch will limit penalties that the law says the companies may charge smokers. A fix will take at least a year to put in place.
The “glitch” is the result of conflicting provisions in the law. Insurers are prohibited from charging older customers more than three times what they charge their youngest customers, since the law depends on making young, healthy people subsidize the cost of care for their elders. But the law also allows smokers to be charged a penalty up to 50 percent of their premiums. The problem is that when you put the two together, it doesn’t always add up.
As HHS puts it in guidance for the insurance industry issued on June 28:
Because of a system limitation . . . the system currently cannot process a premium for a 65-year-old smoker that is . . . more than three times the premium of a 21-year-old smoker.”
Most insurers hadn’t planned to impose the penalty on young smokers because their habit doesn’t have much effect on the cost of their health care, which is far from the case for old smokers. Now, the insurance companies will have to impose equal penalties on both groups so as not to break the “no more than three times” rule. They might impose the maximum penalty on both young and old smokers, in which case young people will see a spike in premiums, or they might keep them low on both. The administration, for obvious reasons, is recommending the latter course, but, as the AP notes, “it’s unclear what insurance companies will do.”
The two experts they spoke to disagreed about the likely outcome: “Levitt said he suspects insurers would keep the penalties low to sign up more young people. Laszweski said he thought they would do the opposite.”